Case round up

Welcome
to our new-look case round up. Each month our resident experts from Pinsent
Curtis Biddle will bring you a comprehensive update on all the latest decisions
that could affect your organisation, and advice on what to do about them

A decision that the employer had not properly informed and consulted
employees affected by a TUPE transfer was overturned on appeal. The transfer
occurred before the introduction of new consultation rules in 1999. The ‘old
rules’ applied and these did not give Nixon a right to complain as she was not
an employee representative.

However, the EAT considered that Nixon would have succeeded under the revised
provisions, which include strict rules for the election of employee
representatives and allow any affected employee to complain about the election.
This decision helps to clarify these new standards.

Key Points

This case is a good example of how not to conduct an election. Criticisms
included:

– Not all affected employees had the opportunity to stand. Some were absent
on the relevant dates or could not attend a meeting at short notice.

– The election process was rushed. It took just two days, but should have
taken at least a week to allow letters to be sent to absent employees, allowing
them to stand and to vote.

– Not all employees received ballot papers.

– Candidates had insufficient time to campaign and take advice.

– At the time of the election, employees were not aware the transfer would
involve redundancies, so they did not fully appreciate the nature of the role
they were standing or voting for.

What you should do

Take care to comply with the statutory rules on elections – protective awards
can run to 90 days’ pay per affected employee.

– When planning changes which attract a duty to consult, allow time for
proper elections. Rushing to meet deadlines to start consultation could mean
dangerous corner-cutting.

Initial lost a cleaning contract to a new provider. The tribunal concluded
TUPE did not apply. The workers employed on the Initial contract varied
significantly and the work done by the cleaners changed over the years to meet
the client’s needs, so there was no stable economic entity but merely a group
of employees carrying out a part of Initial’s business controlled by the
central organisation.

Key points

The application of TUPE to contractor changeovers is full of uncertainty and
conflicting case law. This case adds to that controversy by reviving the
requirement that the transferor’s undertaking is a stable economic entity, a
concept introduced by the European Court of Justice in the Rygaard case but
rejected by the EAT in 1999 in Argyll Training Limited v Sinclair
(EAT/1406/99), when it held Rygaard should not be generally applied and the
concept of stability was not relevant to contractor changeovers for service.
But this decision is less controversial if viewed merely as a case where there
was no dedicated workforce assigned to the contract.

What you should do

This is thought to be a flawed judgement and it should be safe to assume it
will not be followed in other cases on the "stable economic entity"
point. However, if you are in any doubt about the application of TUPE, it is
essential to obtain legal advice. This is a complex area where the wrong
approach can result in expensive liabilities for either the outgoing or
incoming contractors.

Ministry of Defence v Carvey (EAT/202/00)
* * * TUPE held not to apply on contracting in – the first "good"
reason for not taking on the old contractor’s workforce?

The Ministry of Defence terminated a contract with Rentokil for guarding an
army camp and took the service back in-house. No assets transferred and the MoD
did not take on the ten security guards employed by Rentokil. The EAT held
there was no TUPE transfer. First, there was an overriding economic reason for
not taking on the guards and, second, the MoD wished to employ armed guards, a
different category from those employed by Rentokil.

Key points

In the Suzen case [1997] IRLR 255, the ECJ held no transfer occurs where no
assets or employees move on a contractor changeover. But domestic tribunals
have been reluctant to apply this rule. In ECM v Cox [1999] IRLR 559, the Court
of Appeal held the reason the new contractor did not take on the outgoing
contractor’s workforce was important. Here, the MoD was held to have "an
overriding economic reason". This is a slightly adventurous decision. Most
transferees will have an economic reason for not taking employees on, if only
that they are too expensive. A ‘better’ reason for not taking the employees on
was the different kind of guard that the MoD wanted to employ.

What you should do

Treat this case with care. Each case will depend on its facts and this
decision lays down no general rule as to what counts as a good reason for not
taking on the old contractor’s staff.

MSF v Refuge Assurance plc and Other (EAT /1371/99)
* * * * A decision on redundancy consultation with worrying implications for the
public sector and privatised utilities

The union claimed that the employers had not consulted in good time when
making redundancies following a merger. That claim was rejected by both the
tribunal and the EAT.

The union argued that under the Collective Redundancies Directive, the duty
to consult is triggered when collective redundancies are
"contemplated", not when they are "proposed" (the wording
used in section 188 of the Trade Union and Labour Relations (Consolidation) Act
1992). It said that s188 should be interpreted in line with the Directive to
require consultation at an earlier stage, before the employer draws up its
proposals.

But the EAT rejected this – it said "proposes" refers to a later
stage in the decision-making process than "contemplates" and the two
words could not be reconciled.

Key Points

European directives cannot generally have direct effect on private sector
employers like the ones in this case. But they can be enforced against
"emanations of the State", which would include local authorities, NHS
trusts and the former privatised utilities. Given the EAT’s interpretation of
the Directive, this could place such employers under a different duty to
consult from that in s188.

Unlike TULRCA, the directive does not have minimum consultation periods, nor
does it say there must be 20 or more dismissals at one establishment. It says
consultation must be in good time with a view to reaching an agreement. So,
once the employer contemplates redundancies, it must consider how long it might
take to reach agreement on how to avoid the redundancies, reduce their number
or minimise their impact. It must then ensure consultation begins at least that
far in advance.

What you should do

Private sector employers can formulate their proposals unilaterally before
starting consultation. But ensure consultation begins in good time, before any
firm decision is made, and at least 30 or 90 days before the first dismissal
takes effect, depending on the numbers involved.

Public sector employers and others providing public services should be aware
they are vulnerable to arguments, based on the Directive, that they must
consult whenever they envisage 20 or more redundancies, regardless of where
they are. Also consider consulting earlier than required under s188 to avoid
claims that consultation did not start in good time.

Edited by John McMullen and Christopher Mordue

Case of the month, by Christopher Mordue
Workers on sick entitled to annual leave

The EAT ruled that workers can take
paid annual leave under the Working Time Regulations even if they are absent on
sick leave on the days claimed as holiday.

The applicant was on long-term sick leave and had exhausted his
entitlement to sick pay. He requested annual leave on days covered by his
sickness certificates. The EAT held that he was entitled to do so – nothing in
the Regulations requires leave to be taken only if the worker would otherwise
have been at work.

Key points

All workers are entitled to four weeks’ paid annual leave under the
Regulations. The EAT stressed workers are only entitled to take leave if they
give proper the notice under Regulation 15. The employer can give counter
notice (again within specific time periods) preventing the leave being taken on
the days requested. These notice provisions can be excluded or varied in the
worker’s contract. An employer cannot refuse a request if doing so means the
worker could not exercise their full entitlement under the Regulations in that
leave year.

What you should do

Consider whether the worker is likely to be off sick for the rest of the
leave year. Even if they are not receiving company sick pay, they are entitled
to four weeks’ paid annual leave in each leave year as long as it is properly
requested. However, while you cannot deny this entitlement, you can determine
when the leave is taken. If the worker is likely to return before the leave year
is up, you could postpone leave until they come back, provided there will then
be enough time in the leave year to take the full statutory entitlement. This
avoids having to pay them during the sickness absence.

– Bear in mind the ruling may also apply to other types of
unpaid leave, such as additional maternity leave.

– Remember the decision only applies to statutory minimum leave
under the Regulations, not to any additional contractual leave.

– Consider using the employee’s contract to vary the notice provisions
laid down in the Regulations. Lengthening the notice period might make it
harder to take holiday during shorter periods of sick leave.

– Weigh up the cost of providing the holiday during sickness
absence against the fact that the worker will have less holiday to take when
they return.

Star ratings

* Our rating system is designed to help busy HR professionals
prioritise their reading. Does this ruling have immediate implications for your
practices and policies? Is it a one-off decision based on unusual facts? Or is
it one to keep an eye on as it goes to appeal? Case round up will help you
decide. Each case is rated from one to five stars; the more essential it is
that you know about it, the more stars it will have.